Hiring your first employee is hard. In a single founder company, the job is even harder because there are many complex issues that you need to juggle simultaneously, some of which aren't remotely related to evaluation of the person you're trying to hire. In this article, we're going to completely ignore how to evaluate a developers' technical abilities and focus on the business problems that are associated with hiring and some mistakes that you need to avoid.

What do I want this person to do?
One of the biggest mistakes you can make when hiring is not determining job responsibilities in advance. This seems like a no brainer. After all, when you're writing up the job advertisement, you need to put this together, right? Unfortunately, in a single founder company you're probably barely keeping up with what's going on. If things are moving quickly, what you need in an employee can change very quickly as well, regardless of the size of your company.

The solution is to determine what you want from your new employee long term. Try to think 3-5 years out, not 3-5 months. If you hire for short term needs, you'll solve the short term problems, but you may be creating long term problems. You never want to be in a position where you have to even consider getting rid of an employee because you didn't think about both his short and long term role with the company.

Can I afford to hire someone?
This is a very hard question to answer for many companies. It seems straightforward but there are many unknowns to consider. For example, potential employees can have wildly different salary requirements for the same position. One person might only want $75k, while another is looking for more than $100k. And these expectations may be much different than those of the employer. These variations are largely based on experience and where someone is in their career. It's probably best to know what everyone's expectations are in the beginning, but due to convention, salary discussions don't typically take place until much later in the interview process.

If you're running a small company, feel free to discuss salary in the very first interview session. You need to be careful here because it's possible that two similarly qualified people might have salary expectations that differ by quite a bit. Some employers give more weight to the person requesting the higher salary, while others do just the opposite because the lower salary means more profit for the business.

Don't get trapped by this situation. The third and best scenario is to ignore salary as a hiring criteria unless it falls significantly outside your anticipated offering range. The requested salary should have very little bearing on whether you make an offer to hire someone. Whether the prospect accepts your offer is an entirely different story. If you are running your business correctly, then hiring the right people is far more important than saving a few thousand dollars on an employees' salary. The right person will more than make up for the cost of their salary in the work that they do for your company.

From a strictly monetary point of view, you need to consider several factors because salary is not the only cost associated with a new employee. There's salary, employment taxes, health & dental benefits, workers comp insurance, vacation time, holidays, computer hardware, and computer software. There are also indirect costs associated with office space, office furniture, electricity, and any special perks that you want to offer like comfy chairs, free lunches, free parking passes or special company outings. You need to meet all of these financial needs for however long it takes for the new employee to start generating revenue for the business. Ideally, your business will have enough revenue to meet these costs on day one, but that's not always feasible.

Can I afford to not hire someone?
This is simply another way of asking the previous question, but it's an important distinction. If the sole reason for hiring someone is to have a minion, you need to wait. If you're hiring for an upcoming or future need, you should wait. Never hire before the business needs and financial capabilities of your business can support the new employee. It's easy to find meaningless work for an employee to do, but it's much harder to find work that is generating revenue for the business. Don't spend thousands of dollars going through the hiring process, and doing training for someone only to be in a position where you have to let them go a short time later because you can't support the employee any longer. If you think this is the case, then you should hire a contractor, not an employee.

How much overlap do I want?
A lot of people when they're hiring tend to lean towards hiring people who have the same background as they do. This is bad, or at the very least, it's not good. People who are like you will have the same strengths, but will also have the same types of weaknesses. Web developers aren't likely to know a lot about pointers in C. Windows developers seem to have a hard time with Linux. I like to think I'm pretty talented with SQL Server. If I hire someone else with the same talents, how much good are they going to be if I start developing a DB2 or Oracle application? You can say that SQL code is SQL code, but it's not. Compare T-SQL to PL/SQL and they're different enough that you will run into trouble when developing an enterprise level application.

You should look for is someone with a set of skills that will complement your own while still contributing to the business. This is one of the things that Venture Capitalists look for in development teams. It's also what most entrepreneurs look for in a potential partner to start a business and be successful. It's hard to argue against complimentary skillsets but people do it all the time when they hire their own personal Mini-me's.

Should I hire an experienced employee or an entry level employee?
There are pros and cons to hiring any employee, regardless of whether they are experienced or entry level. Entry level employees cost less, but are probably going to make mistakes. They're going to need a bit more oversight than experienced employees and are going to ask for more feedback about whether what they're doing is right or not. Experienced employees can usually be given a task and more discretion about how to get the job done. They are expected to require less oversight and be more productive out of the gate. Their salaries are also higher. In either case, if you have very specialized software that they will be working with, there are training costs that you are going to need to bear.

These are somewhat sweeping generalizations and they don't always hold true, but the real issue here is the size of your company, and who the new employee will be reporting to. If you're a single founder who is 25 years old, would you feel comfortable hiring someone who has 25 years of software experience as your first employee? It wouldn't bother me at all, but it's something that you have to think about. While it's obviously illegal to discriminate based on age, it's not illegal to turn down an applicant if you think that problems will develop due to differences of opinion on issues that come up. Will this person be easy to get along with? Are you going to be comfortable being a manager at all? If not, you might need to rethink how you grow your business by hiring a manager or some entry level developers first.

This is something that you may or may not be able to determine during an interview. I've interviewed people who I immediately felt would be problem employees because no matter what was said, the candidate was right. Sometimes it's what a person says. Other times, it's not so much what a person says, rather how he says it.

It's important to realize that with your first employee, you need to get it right. Most mistakes you want to make early on in the development of your business because later on they are going to cost more. Hiring is not one of those mistakes. In fact, hiring mistakes can be your most costly, no matter when you make them. But if your first hire is a bad one, you could go out of business. I don't want to scare you, but don't screw this up. The bottom line is that there's no right or wrong answer to whether your first hire should be entry level or experienced. You need to do what makes sense for your business in terms of what needs to be done, and how much money you have at your disposal to do it.

What benefits will I offer my potential employees?
When I first started the hiring process, I had a decent idea of what sort of things I would offer as employee benefits. My office is in downtown Worcester, and parking costs around $7 per day, which is roughly $140/month. I strongly disagree with asking employees to pay to go to work so I pay for parking passes at a nearby garage out of company revenues. I also had an idea of what I could offer for health, dental, vacation time, etc. What I wasn't prepared for was questions about things like telecommuting. What exactly was my holiday schedule? What did I think about part time work? What was my 'exact' timeline for hiring, because apparently some potential employees are on a timeline as well.

These kinds of questions threw me the first time they were asked, so I started making a list of what people were asking, and then put together what my answers would be the next time I was asked. By the time I was finished with my interviewing process, I had answers to pretty much everything (except the holiday schedule, which I still haven't nailed down completely).

If you search the web to see what kinds of benefits you can conceivably offer your employees, you'll find that they are as numerous as they are varied. Everything from free soda, free M&M's, cell phones, company cars, and more. Some companies bring in arcade games, pool tables, televisions, and other stress relieving gadgets to keep their employees happy and 'in the game' so to speak.

Ultimately, the choice of benefits to offer is up to you. However you should think long term about the type of employees you want to attract and how you intend to keep them around. The hiring and training process for new employees is a significant cost to your business, if not one of the most significant costs. As the SAS business model clearly demonstrates, the right perks can significantly reduce the turnover rate at a company and improve your bottom line. In any case, give some serious consideration to what you want to offer your potential employees and use it to help sell your company to potential candidates. After all, hiring isn't just a one way process. Just as you are interviewing the candidate, the candidate is interviewing your company to figure out if you're worth a career change. They're also going to ask themselves if your business is solid enough to support the proposed addition of an employee and whether they will still be employed in six months.

Tips for hiring your first employee:
Having gone through the process myself, I can tell you that hiring your first employee is a completely different experience from hiring as an employee of another company. It's somehow a lot different when the money is coming out of your own pocket. With that in mind, I'll leave you with a few tips for hiring your first employee.

1) Be very selective. The first employee you hire could drag down your entire company.
2) Decide on a salary range and make that clear to prospective candidates. You can't go outside of that range without jeopardizing your business and consequently, their job. Don't take chances you can't afford.
3) Above all, be honest with the people you're hiring. Don't make promises you can't keep. You will need to explain a lot about your business, how you intend to keep it going, and how this employee fits into your plans. Keeping it all a 'secret' will simply turn people away rather than attracting them to your cause.
4) Use the phone screen to tell people about your business. Don't waste valuable face to face time doing that. See if they're interested in what you're doing. If not, then move on. I had a candidate tell me over the phone that he didn't feel qualified for the position. This kind of thing will happen and it saves both your time and theirs. Be thankful, not irritated or disappointed.
5) Remember that money isn't everything. Most people are willing to work for a salary that is relatively competitive for the region, especially if they are working on interesting stuff or you're treating them a lot better than they were being treated at their last job.
6) Think long term. If you're not, you might as well close up shop and start looking for a "real job".

Feedback

Enjoyable reading Mike, thanks! I would also add that despite of the Internet and the option of having a virtual office somewhere that you hire someone close by and not two states away even if you found that perfect someone... after a while you lose the momentum
4/27/2007 5:42 AM | Ran

Thanks for this startup hiring overview. Although my company is founded by myself and a friend, most, if not all, of this still advice applies.

I particularly like your section on accounting for all of the "perks" you want provide to your employees. It's easy to say you're going to give them the best hardware, chairs, lunches, etc., but, if you don't actually look at the numbers behind those promises, you'll be setting yourself (and your soon-to-be employee) up for disappointment if you can't afford them.

One thing you lightly touch on is the time and effort factor, you, as a founder, need to put forth to hire someone. It usually costs money to post a job listing on the local job site (baring craigslist, of course). Not to mention all of the time (and associated money) you lose posting jobs, reading resumes, and interviewing. It can definitely be costly when you add up the numbers there, too